New England’s biggest bank, Citizens Financial Group Inc., is determined to go it alone as long as the regulatory burden on big regional lenders remains tolerable, the company’s chief said.
(Bloomberg) — New England’s biggest bank, Citizens Financial Group Inc., is determined to go it alone as long as the regulatory burden on big regional lenders remains tolerable, the company’s chief said.
“I don’t see the need to combine and get more scale – although you will just have to wait and see what happens with regulation,” said Chief Executive Officer Bruce Van Saun. “If there’s a significantly higher cost of doing business, then at that point there might have to be a reassessment.”
Speaking in an interview yesterday on Bloomberg Radio’s Baystate Business, Van Saun added, “At this point I think we’re fine at exactly the scale and size that we are.”
The Providence, Rhode Island-based bank’s stock has plunged about 36% since early February, part of the broader exodus of investors from regional banks perceived to be at risk from deposit flight and tougher regulation in the wake of Silicon Valley Bank’s collapse. Bigger lenders including JPMorgan Chase & Co. and Citigroup Inc. have outperformed.
Van Saun also said that while the recent bank failures were, in his view, due to “mismanagement and poor supervision,” and not a lack of regulation, “I’m a realist and I recognize that the regulators will think that they have to do something.”
If big regional banks like Citizens are required by regulators to apply the so-called AOCI filter — a capital measure that deals with mark-to-market losses on securities holdings — “we would not need to raise any capital,” Van Saun said.
The bank’s capital strength is also sufficient that, if the Federal Deposit Insurance Corp. takes over other failed banks, “and there’s something interesting there,” then Citizens would be able to “kick the tires” on any acquisition opportunities.
Property Losses
For now Citizens is focused on integrating recent acquisitions of bank branches in the New York City region, he said — underscoring his content with the firm’s current size.
“We go up against the megabanks every day in these markets like Boston,” Van Saun said. “We can win jump balls on deals against JPMorgan and BofA and we do on a consistent basis,” he said, referring to Bank of America Corp.
When it comes to the weakening commercial real estate market, Van Saun said that “we will have losses just like anybody who has a commercial real estate exposure.”
“I think those losses will in the end be manageable,” he added. Citizens has $6 billion of office properties, of which $2 billion is “rock solid,” tied to life sciences and other quality enterprises, he said. Of the remaining $4 billion, 70% is in suburban locations, which tends to be safer, he added.
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